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Market Commentary 3/10/25

Markets Navigate Economic and Policy Uncertainty in February – Stocks and Bonds Move in Opposite Directions Amid Market Rotation.

 
Even though six of the eleven S&P 500 sectors traded higher, led by defensive sectors, the S&P 500 declined approximately 1.3% in February. Smaller cap stocks fared worse, falling approximately 5.2% in February. Conversely, bonds traded higher, with the U.S. Bond Aggregate delivering a +2.2% total return. Additionally, investment-grade corporate bonds gained 2.4% as Treasury yields declined.
 
In a rare occurrence as of late, international stocks traded higher and outperformed the S&P 500, with developed Markets gaining +3.0%, and emerging markets returning +1.1%.
 
Stocks traded lower in a late-month sell-off as sentiment weakened. The S&P 500’s decline erased most of its post-election gains, which had been driven by expectations for stronger growth and deregulation under the new administration. Smaller companies underperformed, with the Russell 2000 ending the month more than -10% below its late November peak.
 
The January market rotation continued as last year’s outperformers lagged. The Magnificent 7, a group of mega-cap tech stocks that drove most of 2024’s gains, fell by -8% and dragged down the Nasdaq 100, the Large Cap Growth factor, and the S&P 500. In contrast, defensive sectors and international stocks traded higher, while gold set a new all-time high.
 
In the bond market, Treasury yields declined, with the 10-year yield falling to its lowest level since early December. The decline in interest rates caused bonds to rise, partially offsetting the stock market sell-off.
 

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The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the Index proportionate to its market value.

The NASDAQ 100 Index is an unmanaged group of the 100 biggest companies listed on the NASDAQ Composite Index. The list is updated quarterly and companies on this Index are typically representative of technology-related industries, such as computer hardware and software products, telecommunications, biotechnology and retail/wholesale trade.

The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

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